Inventory grew by almost 14,000 homes this week. That’s a pretty solid number, but actually fewer than our model had predicted for the week. Are sellers backing off?
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I’m Mike Simonsen, I’m the founder of Altos Research. Let’s look at the data for the week of June 24, 2024. Please refer to the video below for all the charts I mention in this transcript!
There are 634,000 single family homes unsold on the market now. That’s an increase of 2.2% for the week. Growth of 14,000 unsold homes. That’s a pretty big gain for a single week. It’s the end of June and the seasonal peaks for listing and pricing all happen now. We probably have one more week of bigger inventory gains, then the first week of July includes the holiday so activity falls way off.
In the inventory chart here: the big takeaway is that we’ll have more inventory than 2020 starting in July. If mortgage rates jump in late summer we would see another boost in unsold inventory. Assuming no big spike in mortgage rates then it looks like the available inventory of unsold single family homes will top out in October with just under 700,000 homes on the market.
We have a simple model for estimating how much inventory growth might happen in a given week based on the same week changes in previous years. For example the model expected inventory to grow by 16,000 units this week and it grew by 13,000.
One way I like to use this forecast model is to observe that between January and April, inventory grew faster than the model predicted almost every week. But in 5 of the last 7 weeks it’s been the other way around. Inventory growth has been coming in below our expectations. Which is what happened again this week. 13,000 vs. 16,000 predicted. This tells us that inventory while growing is doing so at a relatively lighter pace than earlier in the year. This isn’t indicative of runaway supply growth.
You can see the continuation of that theme with the new listings volume each week. There were 72,000 new single family listings unsold this week. That’s basically unchanged from the previous week. It’s 13% more sellers than last year at this time, but it’s not expanding any more this summer. The pace of sellers has plateaued for the year.
As I’ve been saying, for those expecting a continued much bigger growth in inventory in the second half of the year, where inventory growth helps supply and demand get out of whack, a really bearish scenario, one thing required would be: more sellers. You’d need to see week over week seller growth. We have more sellers than a year ago, but you’d also expect that to be continuing each week. And it just is not.
You can really see that in this chart. The light red line is from 2022. In late June of that year, inventory growth hadn’t peaked yet. New sellers were rushing to market, then after July 4th they just stopped. See how the 2022 line takes a big dip July 4th. I’ve highlighted that person in green. At that moment sellers dipped July 4th week and never came back. Suddenly the supply/demand imbalance and market correction for 2023 had a cap. Not enough sellers.
The pattern is similar now, though not as extreme as 2022. This year new listings growth seems to have already peaked back in May. That’s totally normal. May peak for new sellers is quite common. What it tells us therefore is that this year is that like 2022, we don’t see signs of seller volume continuing to expand. The dark red line illustrating the new listings volume this year is horizontal.
That’s the supply side of the supply / demand equation. Supply isn’t great, it’s not really getting out of hand. On the Demand side, however, the data is pretty weak. There were only 67,000 new contracts started for single family homes this week. That’s 2.7% fewer than last week and 3.3% fewer than the same week a year ago.
In this chart of the new contracts pending, you can see the dark line from this year, dipped below last year’s pace for the first time in months. This chart is of the new contracts started each week. These are single family homes that have been listed for sale, take offers and go into contract.
If we look at the total set of homes in contract, there are 396,000 of those. Sales take 30-45 days to close, so these homes will sell mostly in July. That number is just a couple percent more than last year at this time. The pendings count peaked in early June, which is totally normal. The second half of the year has fewer and fewer home sales.
The takeaway from the pending sales data is that any growth in sales volume we might have seen early in the year is gone. This is of course a function of mortgage rates staying in the 7s. There’s just no incentive for buyers to jump now. Unless and until mortgage rates drop, we’re in this holding pattern.
The median price of all the homes for sale in the US right now is $455,000. That’s just a hair lower than last week. And it’s unchanged from a year ago. So home prices by this measure are flat compared to last year. This is not surprising given the pace of sales I mentioned above, there is no upward pressure on home prices.
The median price of the homes newly in contract this week is $395,000. That’s down 1% for the week and is just 2.6% above last year at this time. That’s the chart we’re looking at here. We’re past the peak pricing of the year.
If we look at all 396,000 of the homes in contract, the median price is 4.4% greater than a year ago.
So the price appreciation range is 0 to +4% depending on how you measure the market. The headlines which use the lagging indicators of home sales that happened a month to two ago, those headlines are still showing 5-6% home price appreciation over 2023 right now. We expect those headlines to compress in the second half of the year, into this 0-4% range.
So continuing on the theme, slightly more inventory, and weaker demand, you’d expect price reductions to be climbing. Price reductions are indeed climbing. There are more sellers each week that have to cut their asking prices. Nationally now 36.9% of the active market has taken a price cut from their original list price. That’s notably soft.
When we look at the regional data here, most of the year the Florida markets have been leading the way. Sarasota, Punta Gorda, all those Gulf Coast Florida markets. Supply is way up and demand way down in those areas. You have elements like property taxes and insurance costs that are way up so you have a lot more sellers. Now as the year grows, the western US markets are starting to sneak back in with more price reductions. Austin and Phoenix and Denver in particular. Remember two years ago, these pandemic boom towns led the slowdown. Keep your eyes on those parts of the country. They had surprisingly strong 2023, but if we can use price reductions as a leading indicator, those markets are slowing again.
And that’s why we do this data work each week. Homebuyers are obviously sensitive to the cost of money. And mortgage rates stayed higher for longer than anyone anticipated this year. They haven’t come down yet. What if they do? If you aren’t watching the data each week, you’re probably behind the curve. You have buyers and sellers who have no idea how this market is changing right now. They need to hear the data from you. You should join us at Altos.
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